10 ways South Africa can recover from COVID-19 and build a sustainable and inclusive future

Insights from a UN economist 

Over the past 28 years, South Africa has wrestled with the challenges of inequality, extreme poverty, social injustice, and environmental degradation. These deep-rooted issues are linked to a long history of apartheid resulting in an exploitative economic system, political repression and exclusion, racial discrimination, violation of fundamental rights and asset expropriation. 

I joined the Resident Coordinator’s Office in 2020. At the time, the country was in its second hard lockdown of the COVID-19 pandemic. The impacts of the pandemic were significant, felt across all socio-economic sectors of South Africa. Manufacturing was disrupted, food value chains were affected and prices rose resulting in increased food insecurity. Gender-Based Violence escalated sharply and job losses affected nearly 3 million workers, particularly concentrated among low-income earners and women. 

In the depths of this crisis, I worked together with the Resident Coordinator at the time to publish an economic analysis on the COVID-19 recovery. The aim was to provide fresh ideas to inform policy making on how to not only ‘build back better’ but also differently, in order to ensure a more rapid transition to a sustainable future for South Africa. It was envisioned as a new and innovative approach to conducting research and analysis with the hope of showing that UN country offices in Africa are not just knowledge absorbers of what the UN produces at headquarters and regional commissions – but are also generators of ideas and insights. 

The publication benefits from contributions by UN experts from agencies including ILO and OHCHR as well as from the Resident Coordinator Office and the World Bank who, in most cases, are based in South Africa and have built valuable experience in their areas of expertise over the years. The result is a volume formed of a collection of 13 journal article sized chapters based in some instances on an ‘off the track’ analytical approach while at the same time providing a clearly delineated set of policy proposals on how to bridge South Africa’s socio-economic divide and how to support and accelerate change. 

Here are ten insights from this analysis:

1) Financing the SDGs: the government has created different funds and leveraging mechanisms, but these are too small and limited to be impactful – and for a just transition, there is a need not just for single or multiple funds, but for a ‘domestic climate finance framework’ and a ‘system thinking approach’ to ensure a holistic approach to climate change mitigation, adaptation and poverty reduction.  

2) Rights-based approach to budgeting: government resources at social spending are being squeezed, in part because a growing share of fiscal resources has been absorbed by debt servicing; there is, therefore, a need for the adoption of progressive and effective taxation as key to relaxing fiscal constraints.

3) Basic Income Grant: to include those aged 18-59 in the social protection system, the government should create a BIG, which could be directly linked to the tax-collection system as a change to a more integrated system in which net beneficiaries can gradually turn into net contributors as they enter the labour market, transition from the informal to the formal economy and, if they start their own business, move to formalisation as their business expands. For the latter to happen, the proposed system would have to be coupled with ample support to Small, Medium and Micro Enterprises and other interventions to enhance employability in different sectors of the economy, including emerging ones such as the green economy and the Social and Solidarity Economy (see point 6). 

4) Gender equality: despite progress since 1994, gender gaps remain, especially regarding economic opportunity, voice and agency. Proposed interventions include overcoming legal and social barriers to entry and retention in the labour market, financial inclusion and strengthening women’s voice and agency.

5) Building a capable and developmental state: progress has not been linear; policy coordination between the government spheres has been limited; and long-term planning has lacked the ability to bolster government structures and performance.  However, there are opportunities to redirect this trajectory, starting with institutional building and strengthening implementation.

6) Social and Solidarity Economy (SSE): This shows great potential to lead to sustainable job creation, employ young people, and connect people and communities, and in doing so becoming a force for altruism and social cohesion. Thanks to government and UN support to various SSE-related projects, South Africa is well positioned to use the SSE as a platform to bridge the country’s deep rooted socio-economic inequality gaps. 

7) Small business development at the district level: there is a lack of sufficient coordination in small business ecosystems at the district level and, therefore, the need for greater exchanges and knowledge- or experience-sharing between different players in the system. 

8) Industrial Development Zones and the Special Economic Zones: these are not playing their expected role of effective instruments for reducing spatial inequalities, with lack of alignment between the country’s industrial policy and its broader macroeconomic policy framework being a key factor behind limited achievement. 

9) Policy space for industrial policy: South Africa still has space for industrial policy and should carve out space to develop, within the manufacturing sector, the pharmaceutical industry and its technological capabilities to produce vaccines for both South Africa and the whole of Africa.

10) Regional integration: South Africa’s transition towards a greener, fairer and more inclusive economy has important implications for other countries in the region as well.  In order to strengthen regional trade integration and ensure that the benefits are fully realised across the continent, more capital and investments in infrastructure networks are needed. 

By offering new thinking and solutions to key development challenges arising from the COVID-19 pandemic, the insights from this publication can be used by both policy makers and practitioners in South Africa, as well as across the broader African continent and in other developing countries. 

This blog was written by Ricardo Gottschalk, Senior Economist at the Resident Coordinator’s Office in South Africa. Editorial support by UN DCO. 

The full publication can be accessed here. To find out more information about the UN’s work in South Africa visit Southafrica.un.org